The Fed Keeps Hammering

Today’s announcement from the Federal Reserve confirmed the 3/4% rate hike that the market anticipated, bringing the current Fed Funds Rate to between 3.75% – 4%.

Fed Chairman Jerome Powell, in his speech immediately following the announcement, stated that it is premature to be thinking about a pause, and that the Fed has increased their long-term target rate that will be needed to achieve their objective.

Since this was pegged at about 4.95% prior to the announcement, this now could reach 5.5% or above before we see the Fed stop hiking.

Powell continued to hammer his commitment to raising rates until inflation shows it is working its way down towards their 2% long term target, stating that the risks of not tightening enough are greater than those associated with over tightening. He noted that not tightening enough has the risk that inflation will become entrenched, where over tightening can quickly be unwound with stimulus.

What does this mean for mortgage interest rates? They will go higher.

We still believe that the 3.75% in Fed rate hikes we have experienced since March will eventually slow down the labor market and the US economy in the months to come. Although the real estate and mortgage markets feel the impact immediately, other industries will soon feel the pain as well.

Hopefully we will see a slowdown come sooner than later. We will maintain a locking bias.